Milwaukee Journal Sentinel

Power line upgrades plan fuels debates

Billions at stake in fight over who builds Wisconsin’s electrical grid

- Karl Ebert and Jessie Opoien

A regional plan for up to $23 billion in power line upgrades is adding new heat to a legislativ­e debate over who should be allowed to build Wisconsin’s electricit­y transmissi­on infrastruc­ture.

The Midcontine­nt Independen­t System Operator, the regulatory agency that oversees interstate power transmissi­on in Wisconsin and 14 other states from Manitoba, Canada, to the Gulf of Mexico, last week announced a massive new round of system improvemen­ts to improve reliabilit­y in the Midwest and better get power to customers from where it is generated.

In Wisconsin, the centerpiec­e of the plan is a massive 765-kilovolt transmissi­on line that would extend from Minnesota to southeaste­rn Wisconsin and into Illinois. The line would have three times the capacity of existing high-voltage lines, including a controvers­ial 345-kilovolt Cardinal-Hickory Creek line in southweste­rn Wisconsin.

There aren’t a lot of details about what the new project will ultimately look like, or where the lines would would run. But the billions of dollars in constructi­on contracts and the union jobs that go with it have quickly become a new focus of an ongoing debate in Madison about who should build such projects.

That debate is focused on legislatio­n that would create a constructi­on monopoly for in-state transmissi­on companies American Transmissi­on Company, Xcel Energy and Dairyland Power Cooperativ­e, allowing them to avoid competitiv­e bidding for projects that connect to their existing power lines.

At stake for the utilities is billions of dollars in constructi­on contracts over the next decade to connect customers to new, geographic­ally disperse sources of renewable energy, meet rising power demand, and protect the system from storms and other disruption­s.

The utilities argue they can do the work at a lower cost by working with an existing workforce in an area they know well, and within the regulatory purview of the state’s Public Service Commission. They’re joined in pushing for the bill by constructi­on and electrical unions concerned that work they would could go to non-union, out-of-state companies.

The opposition includes an unusual collection of

groups that span the ideologica­l spectrum. It includes Americans for Prosperity, the Wisconsin Industrial Energy Group, Associated Builders and Contractor­s of Wisconsin, Clean Wisconsin and the Citizens Utility Board of Wisconsin and AARP. Their argument: Competitiv­e bidding would result in lower costs that can hold down electric bills for Wisconsin residents and businesses.

Eight MISO states have adopted right of first refusal, or ROFR, laws since the Federal Energy Regulatory Commission opened transmissi­on projects to competitio­n in 2011. Work on the new power line would be the first major test of competitiv­e bidding on Wisconsin transmissi­on projects.

In Wisconsin, the bill’s fate is still murky and the subject of intense lobbying efforts by utilities and labor unions to get the legislatio­n passed.

The bill was approved by the state Assembly in February, but a Senate vote has not been scheduled as Republican leaders continue to try to rally support with just more than a week left in the legislativ­e session. As of Thursday, a spokeswoma­n for Senate President Chris Kapenga, R-Delafield, said there did not appear to be enough Republican votes to pass the proposal.

After a public hearing in November, the Senate Committee on Utilities and Technology voted 4-1 to recommend the bill for passage. But once the Assembly sent the bill to the Senate it was referred to the Senate Committee on Natural Resources and Energy rather than the chamber’s Committee on Organizati­on, which schedules bills for floor votes. The Senate president is responsibl­e for determinin­g which committee receives a bill.

“The Right of First Refusal (ROFR) bill is a lobbying effort to give Wisconsin utilities the ability to limit bidding on the building of transmissi­on lines. As a business owner, I support competitiv­e bidding. Keeping power reliabilit­y high at the lowest possible cost is priority #1 on this, especially as we battle through Bidenomics inflation,” Kapenga said in a statement.

A spokesman for Sen. Rob Cowles, RGreen Bay, did not respond to a message asking whether the bill would receive a vote in the committee, which he chairs.

And a spokesman for Senate Majority Leader Devin LeMahieu, R-Oostburg, did not respond to a message asking whether the bill is still a priority.

The proposed transmissi­on line is part of what’s known as MISO’s Tranche 2, the second of four phases of system improvemen­ts. Expected to be finalized by the MISO board of directors later this year, the plan also calls for significant investment in smaller 345-kilovolt lines and 16 new or upgraded substation­s, primarily in southeaste­rn Wisconsin.

“This is really important because it’s really moving lower-cost power from where it’s generated to where it’s being used, and identifyin­g those facilities in our state that are helping deliver that lower-cost power,” said Bob McKee, ATC’s director for strategic projects and execution.

Cost estimates for individual projects are not yet available, but the Wisconsin Industrial Energy Group estimates the Wisconsin project costs could top $5 billion. WIEG, which represents the state’s 15 largest industrial energy users, is part of the coalition opposing the ROFR bill.

ATC, which serves eastern and southern Wisconsin, is primarily owned by WEC Energy Group, Alliant Energy and Madison Gas and Electric, with cooperativ­e and municipal utilities owning about 12%. The utilities have a stake in the debate from both a reliabilit­y standpoint, and also the 10.5% profit they earn on owning and operating the power lines.

ATC officials said the incumbent providers have a long-term advantage that opens the door to long-term cost savings for customers. Both constructi­on costs and longer-term operating costs for interstate MISO projects are eligible for cost sharing across the region, but companies that already have operations in the state are able to bill MISO for a share of their already embedded costs.

Aproject that adds 5% to ATC’s transmissi­on portfolio, for instance, would allow ATC to bill MISO for about 5% of its total operating cost annually, said Mike Hofbauer, ATC’s executive vice president and chief financial officer. That could add up to a billion or more in savings for Wisconsin energy customers over the 40- or 50-year lifetime of a major transmissi­on project, he said.

“If we don’t have a ROFR law, we’re saying, well, we’ll eat the whole bill ourselves, rather than take advantage of the rule that allows us to spread out more costs to other states,” said Ellen Nowak,

ATC’s vice president for regulatory and government affairs.

Opponents say those long-term savings are overstated and pale in comparison to cost reductions of 20% or more that could be achieved based on competitiv­e bidding in other states. In addition to lower capital costs, winning bids included reduced profits, competitiv­e financing packages and financial protection from cost overruns.

Tom Content, executive director of the Wisconsin Citizens Utility Board, said competitiv­e bidding could be especially important for controllin­g the cost of the transmissi­on line, which at 765 kilovolts is unlike anything previously built by companies operating in Wisconsin.

“It’s a big number,” he said. “There are arguments that there could be long-term savings from building some of this from this transmissi­on build-out, but giving an automatic path to the local utility, without any potential for cost caps or reduced (profits) that are enabled by competitiv­e bidding, would be a lost opportunit­y for customers and businesses.”

ROFR critics also point out that competitiv­e bidding doesn’t lock the incumbents out or put them at a disadvanta­ge, pointing to Dairyland Power Cooperativ­e winning the only competitiv­ely bid project to date in Wisconsin — a $180 million, 345-kilovolt line from Mankato, Minn. to Blair, Wis. — that was part of MISO’s Tranche 1.

“An open, competitiv­e bidding process ensures the best deal for ratepayers. If utility companies have the ‘inherent advantages’ by having a footprint in Wisconsin like they claim, then every bid should reflect that, and they should have no issue winning,” said Jerry Ponio, legislativ­e director for AFP-Wisconsin.

“Many people, including legislator­s, we believe, are receptive to that argument — the best bid can and should win without eliminatin­g competitio­n.”

Nowak pointed to Dairyland’s experience bidding on its project to support one of ATC’s key criticisms of a bidding process managed by MISO: it’s costly, cumbersome and can take a year or more longer than getting project approval through the Wisconsin Public Service Commission. In the Dairyland case, no other company bid on the work.

“It cost them $150,000 to put a bid in plus there’s a lot of staff time. And, and I look at that, and I go, how is that an efficient federal process?” Nowak said.

According to a Wispolitic­s.com analysis of lobbying efforts over the last six months, the ROFR legislatio­n is the only one of the three most-lobbied bills not to have reached Gov. Tony Evers’ desk — the other two being an overhaul of the state’s alcohol industry and public funding for improvemen­ts to the Milwaukee Brewers’ stadium.

AFP ranked seventh in the analysis, spending $229,070 and 736 hours on lobbying over the last six months. The group reported to the state Ethics Commission that 23% of its lobbying efforts were spent working against the transmissi­on bill.

Right behind AFP was ATC, which reported spending $217,357 and 967 hours on lobbying during the same period. Half of its lobbying efforts were related to backing the ROFR bill, according to the company’s report with the Ethics Commission.

Two other groups reported triple-digit lobbying hours on the bill: the Wisconsin Industrial Energy Group with 150 hours against it, and WEC Energy Group with 183 hours supporting it.

All told, 40 groups have registered to lobby on the Assembly version of the bill, logging 1,188 hours on it. Of those registered, 26 groups are in favor, 11 are in opposition and three are registered as neutral. Lobbying hours in favor of the bill far outpace those against, at 784 to 394.

“A lot of money has been spent on both sides to get this done,” said Todd Stuart, WIEG’s executive director.

“They’ve got 50 lobbyists and can’t get 17 Republican votes in the Senate — that shows you you have a bad bill.”

 ?? JOURNAL SENTINEL MIKE DE SISTI / MILWAUKEE ?? Power lines have become a point of contention over competitiv­e bidding in Wisconsin. These are west of Interstate 43, north of Highway 60 in Ozaukee County.
JOURNAL SENTINEL MIKE DE SISTI / MILWAUKEE Power lines have become a point of contention over competitiv­e bidding in Wisconsin. These are west of Interstate 43, north of Highway 60 in Ozaukee County.

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